The stock market plunged in its last trading session, with the Dow losing 3%, the S&P 500 declining 4%, while the tech-heavy Nasdaq Composite retreating more than 5%. This marked a sharp reversal from the market’s gains on Wednesday, which was one of the best sessions this year as Fed chair Jerome Powell declared that a 75-basis point rate hike was off the table as of now.
However, the market’s volatility, which has led to several fundamentally sound stocks declining in price, provides the opportunity for investors to buy them for future gains. Putting money in stocks that are down, in contrast to selling them, might mean setting up for their rebound gains later. Fundstrat’s Tom Lee asserts that despite bearish market sentiments, investors should buy stocks.
Against this backdrop, we think, small-cap stocks ArcBest Corporation (ARCB), Vivint Smart Home, Inc. (VVNT), and Virtus Investment Partners, Inc. (VRTS) could stage a turnaround in the near term based on their companies’ solid fundamentals, and thus could be solid bets now.
ArcBest Corporation (ARCB)
ARCB in Fort Smith, Ariz., is a freight transportation and integrated logistics service provider. The company operates through the three broad segments of Asset-Based; ArcBest; and FleetNet. It has a market capitalization of $1.94 billion.
On April 28, ARCB announced the reauthorization of its common stock repurchase program with an increase in the total amount available to $75 million. The company also declared an increase in its quarterly dividend to $0.12 per share from $0.08 per share, which is payable to shareholders on May 25. The move is expected to speed up returns of capital and drive greater value to ARCB’s shareholders.
For its fiscal first quarter, ended March 31, 2022, ARCB’s revenues increased 61% year-over-year to $1.34 billion. Its non-GAAP operating income rose 166.3% from the prior-year quarter to $108.64 million. Its non-GAAP net income and non-GAAP EPS improved 180.1% and 190.6%, respectively, from the same period in the prior year to $79.78 million and $3.08.
The $3.71 consensus EPS estimate for the quarter ending June 30, 2022, indicates an 88.3% year-over-year increase. And the $1.36 billion consensus revenue estimate for the same quarter reflects a 43.8% rise from the prior-year quarter. Furthermore, ARCB has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has declined 33.8% in price year-to-date. However, it gained 8.4% over the past month and 9.8% over the past five days to close yesterday’s trading session at $79.39.
ARCB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
ARCB has a Growth grade of A and a Value and Momentum grade of B. In the 22-stock Trucking Freight industry, it is ranked #5. The industry is rated B.
Click here to see the additional POWR Ratings for ARCB (Stability, Sentiment, and Quality).
Vivint Smart Home, Inc. (VVNT)
VVNT in Provo, Utah, is a security and protection services company that sells, installs, services, and monitors smart home and security systems primarily in the United States and Canada. The company’s offerings include its smart home platform, which includes the cloud-enabled smart home operating system. It has a $1.34 billion market capitalization.
On February 3, VVNT and independent mortgage company New American Funding announced a strategic partnership to help homeowners protect their homes. David Bywater, CEO of VVNT, said, “The first step many homeowners take after completing their home financing is making sure it’s connected and secure, so joining forces with New American Funding to make that process easier for their customers makes this a natural and exciting fit.”
VVNT’s revenue increased 14.7% year-over-year to $392.75 million in its fiscal first quarter, ended March 31, 2022. Its income from operations came in at $9.34 million, up substantially from its negative year-ago value. Its adjusted EBITDA rose 25.9% from the prior-year period to $202.30 million.
Analysts expect VVNT’s EPS to increase 32% year-over-year in its fiscal year 2022. The Street expects its revenue for the same year to improve 9.7% from the prior year to $1.62 billion. VVNT has topped consensus EPS estimates in three of the trailing four quarters.
The stock has declined 35.5% in price year-to-date. However, over the past five days, it has gained 20.2% to close yesterday’s trading session at $6.31.
It is no surprise that VVNT has an overall B rating, which translates to Buy in our POWR Rating system.
VVNT has a B grade for Sentiment and Quality. It is ranked #6 of the 61 stocks in the Consumer Goods industry.
To see the additional POWR Ratings for Growth, Value, Momentum, and Stability, click here.
Virtus Investment Partners, Inc. (VRTS)
VRTS in Hartford, Conn., operates as a publicly-owned investment manager. The company launches equity, fixed income, and balanced mutual funds for its clients, and invests in public equity, fixed income, exchange-traded funds, and real estate markets. VRTS has a market capitalization of $1.33 billion.
On January 3, VRTS announced that it had acquired Stone Harbor Investment Partners, a premier manager of emerging markets debt, multi-asset credit, global corporates, and other strategies. The acquisition is expected to diversify the company’s investment capabilities, available in its multi-boutique model.
For its fiscal first quarter, ended March 31, VRTS’ adjusted total revenues increased 18.5% year-over-year to $221.95 million. Its adjusted operating income improved 15.6% from the same prior-year period to $90.10 million. Its adjusted net income attributable to VRTS and adjusted EPS came in at $61.65 million and $7.87, respectively, up 12.9% and 16.1% from the prior-year period.
The Street’s EPS $35.78 estimate for its fiscal year 2023 indicates a 9.1% year-over-year improvement. Likewise, the Street’s$913.32 million revenue estimate for the same year reflects an increase of 3.6% from the prior year. In addition , VRTS has beaten consensus EPS estimates in three of the trailing four quarters.
The stock has declined 40.7% in price year-to-date and marginally over the past five days to close yesterday’s trading session at $176.20.
VRTS has a Value and Momentum grade of B. In the 59-stock Asset Management industry, it is ranked #19.
In addition to the POWR Ratings we have stated above, one can see VRTS ratings for Growth, Stability, Sentiment, and Quality here.
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ARCB shares were trading at $78.45 per share on Friday morning, down $0.94 (-1.18%). Year-to-date, ARCB has declined -34.49%, versus a -13.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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